A:

A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone money to purchase a house or business. Ginnie Mae buys home mortgages from banks and financial institutions, bundles them together, and then markets portions of these bundles to investors.

For example, if you invest $100,000 in a Ginnie Mae, you are essentially lending someone money to buy a house or business with the help and the guarantee of a government organization. You would receive monthly payments consisting of interest on the loan and perhaps also a portion of the principal. These are similar to the payments a bank receives when it lends money to a home or business buyer. If it isn't included in the monthly payment, the principal is paid back at the end of a specified time period.

Ginnie Maes are the most popular type of mortgage backed securities because they are guaranteed by the U.S. government. They are not impervious to risk, but the government will step in to prevent the collapse of Ginnie Mae and its securities.

To learn more, see Profit From Mortgage Debt With MBS.


RELATED FAQS
  1. Are mortgage-backed securities backed by any guarantees?

    Actually, any mortgage-backed security (MBS) guarantee depends on who issued it.To review, an MBS is a security, created ... Read Answer >>
  2. How does Fannie Mae (FNMA) make money?

    Fannie Mae is a government-sponsored enterprise (GSE) established in 1938 to expand the flow of mortgage money by creating ... Read Answer >>
  3. What are the best ways to invest in mortgage-backed securities (MBS)?

    Find out how you can start investing in real estate through mortgage-backed securities. Read Answer >>
  4. How do you use the FNMA selling guide?

    Learn about Fannie Mae Selling Guide and find out details about how its parts provide support to the business relationship ... Read Answer >>
  5. Can I buy a house directly from Fannie Mae (FNMA)?

    Yes; you can buy homes directly from Fannie Mae. Fannie Mae (the Federal National Mortgage Association, or FNMA) is a government-sponsored ... Read Answer >>
  6. What are some historical examples of debt securitization?

    Find out how debt securitization started, how it works and why the government facilitated the mortgage-backed security market ... Read Answer >>
Related Articles
  1. Professionals

    Agency Issues

    The federal government has authorized certain agencies and certain quasi agencies to issue debt securities that are collectively referred to as “agency issues”. Revenues generated ...
  2. Mutual Funds & ETFs

    VBMFX: Top 5 Holdings Analysis

    Find out which securities hold the top five positions in the world's largest bond fund, the Vanguard Total Bond Market Index Fund.
  3. Options & Futures

    20 Investments: Mortgage-Backed Securities

    What Is it? A mortgage-backed security (MBS), also known as a "mortgage pass-through" or a "pass-through certificate", is an investment instrument that represents ownership of an undivided interest ...
  4. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  5. Professionals

    Federal Issues

    CFA Level 1 - Federal Issues. Learn about the various federally related insitutions and government sponsored enterprises. Reveals the products and services they provide.
  6. Professionals

    Agency Bonds

    FINRA Series 7 Online Study Guide - Section 4
  7. Credit & Loans

    5 Tips to Lower Your Sallie Mae Payments

    Learn the essential tips on how to work with the Sallie Mae Corporation to lower the monthly payments on your private student loan.
  8. Bonds & Fixed Income

    The Top 5 Intermediate Bond Funds for 2016

    Discover the top five intermediate-term bond mutual funds that invest in fixed-income securities with an average maturity between one and seven years.
  9. Professionals

    Mortgage-Backed Securities - MBS

    FINRA/NASAA Series 65: Section 8 Mortgage-Backed Securities - MBS. In this section Federal Home Loan Bank (FHLB), fannie mae (FNMA), Ginnie Mae (GNMA) and Freddie Mae (FHLMC).
  10. Insurance

    The Government And Risk: A Love-Hate Relationship

    Though the U.S. government can help its citizens by subsidizing risky loans, the costs always come back to the taxpayers.
RELATED TERMS
  1. Ginnie Mae Pass Through

    A type of investment issued by the Government National Mortgage ...
  2. Ginnie Mae - Government National Mortgage Association - GNMA

    A U.S. government corporation within the U.S. Department of Housing ...
  3. Dwarf

    A slang term used to describe a pool of mortgage backed securities ...
  4. Pass-Through Certificate

    Fixed-income securities that represent an undivided interest ...
  5. Tandem Plan

    A mortgage purchase program subsidized by the U.S. government. ...
  6. Mortgage Pool

    A group of mortgages held in trust as collateral for the issuance ...

You May Also Like

Trading Center